Selling NFA Trust?

[tb-av]

I don't really understand trust.

I think the part you are overlooking is that the Trust would retain the money.

Let's just say you make a Trust of your $1000 item. Person X is the beneficiary. You tell me, hey, give me $1250 and I'll make you the lead trustee and then you can remove me as trustee.

That scenario has me in charge of a Trust with the $1000 item AND the $1250 ( which was mine anyway ). So now I have your NFA item and my money.

That is not to mention your beneficiary will be changed by me as well. It may even be possible for the kicked out beneficiary to sue you for lack of fiduciary responsibility... not sure on that.

I'm not a lawyer, but that's what it sounds like you are trying to do. Even if you said, ok, before I take over, I have to pay you a fee to take over. It still sounds like you are being derelict in your trustee duties. Also once agreements are made and money changes hands, that is a contract / sale, and suggests, if not, verifies a transfer of valuables from one to another which would violate the NFA.

It just sounds like a really strange situation all the way around, for you and the person buying in.

There might be some way around it but I sure wouldn't want to try. Tax laws have provisions for like kind exchanges and things like that. All sorts of other situations possible that the NFA stuff is not allowed to do.

[Smokin338]

This is a very dangerous game your trying to play! In the eyes of BATFE any time a NFA item changes hands, change(s) have to be made on their side as well. In essence they want the $200 to make the change(s). If you saying what your saying and just sell the package (trust & item) as a whole, guess what... BATFE still has you down as Grantor of the trust and not the new owner. You can add /remove all of the Trustees you want to a Trust, but the Grantor of such can't be removed. Now if this was a LLC / Corp you made be able to do so, but in the end the cost of Selling an Entity. Would far out weight the cost of the Individual just setting up their own Trust and doing the Form 4.

[elephant]

It still sounds like you are being derelict in your trustee duties.

The lawyer who set up your NFA trust is the trustee, not you. Once you place assets into a trust, they are no longer yours. The assets in the NFA trust technically belong to the beneficiary on file. I don't think anyone understands trust fully. I know that 90% of NFA trust lawyers establish the NFA trust as a living irrevocable trust which means you can not by law dissolve the trust and only the trust owns the assets. The BATFE sends these trust documents to the IRS every time someone buys a NFA item. Your trust is on record and everything listed in the trust is disclosed to the IRS. If your silencer broke and you sent it in and they charged you $250 to fix, technically the trust is responsible for the expenditures because if the money came from you, you would be comingling money. As far as the IRS is concerned, any NFA item purchased should purchased from funds in the trust no the Grantor. So that is why I was wanting to know if I could sell a trust out right. And since the 2 lawyers I spoke to said there were no laws against it but still said there is no amendment or document for that purpose I was maybe thinking someone has done it. I probably shouldn't have asked.

[tb-av]

The lawyer who set up your NFA trust is the trustee, not you.

No that is not true. They could be a Trustee if they are so named in the Trust. Most people that set up a Trust are the Grantor and are also named as a Trustee. That's why they get to use the goods in the Trust during it's life.

Once you place assets into a trust, they are no longer yours. The assets in the NFA trust technically belong to the beneficiary on file.

Correct, but as Trustee, you still have control over them.

I don't think anyone understands trust fully.

[QUOTE=elephant;2397853]Actually, most do understand that and why they put efforts into determining exactly who will get the goods in the event of their death. Regarding NFA, we will say it's the 'typical Trust point of being in place' ... IOW, it is the part beyond the Trustee's ability of current enjoyment of the goods in the Trust. The "who gets my toys when I die, part"

I know that 90% of NFA trust lawyers establish the NFA trust as a living irrevocable trust which means you can not by law dissolve the trust and only the trust owns the assets.

Those terms are contradictory. "living irrevocable" A Trust is either "Living = Revocable" or "Irrevocable". 99% of NFA Trusts are LIVING = REVOCABLE. They can be changed by the Trustee or Trustees.

The BATFE sends these trust documents to the IRS every time someone buys a NFA item. Your trust is on record and everything listed in the trust is disclosed to the IRS. If your silencer broke and you sent it in and they charged you $250 to fix, technically the trust is responsible for the expenditures because if the money came from you, you would be comingling money.As far as the IRS is concerned, any NFA item purchased should purchased from funds in the trust no the Grantor.

That is technically true but not practically true. If the suppressor needs repair and the Trust does not have $250, then you as Grantor place $250 of your money into the Trust and then you as Trustee, pay the repair shop on behalf of the Trust.

So that is why I was wanting to know if I could sell a trust out right. And since the 2 lawyers I spoke to said there were no laws against it but still said there is no amendment or document for that purpose I was maybe thinking someone has done it. I probably shouldn't have asked.

There may very well be no law against it. I can sell you my NFA items. You can sell me yours. BUT... there are still laws that govern how we need to go about doing that. Yes you could probably sell me your Trust... but... you as Trustee would most likely still have to hold the items until such time they could legally TRANSFER by SALE to me as a Trustee. That is totally different from you saying, hey, I'll add you as a Trustee. Your scenario intent as a Trustee is to clearly sell the Trust. The Trust is a set of highly controlled goods that have specific taxable restrictions on SALE and... even on possession.

All that is aside from what you mentioned about the Trust being for the Beneficiary. Even a Living Trust is set up for the beneficiary, but we do know the beneficiary could be changed. So that aspect could be deemed a non-issue. Selling, Transferring, Possessing NFA items is a controlled / taxed situation and a Trust can't circumvent that aside from the fact it can allow for Trustee possession.

As someone mentioned above. By the time you play by all the rules it would make no sense for someone to do this as the waiting period would still be in effect. It is possible some strange scenario where you had some one of a kind items and maybe the new owner would want to have the same beneficiary. But also as mentioned, you can't change the Grantor. So let's say someone pays you $10K and the NFA says... guess what, it's the new owners lucky day. We will process all the papers in 24 hours. You do the 'sale' and you walk out the door and get run over by a bus. Poof! The goods now belong to the beneficiary.

You are looking to make money but honestly the risks to the buyer would likely be so great that you would actually have to severely discount the items to get anyone to take the chance.

[ThePhonMan]

I would still question one of your lawyer's statements, "The NFA reports all Trusts to the IRS...".

I have never submitted a Form 4 or "Assignment to Trust" doc (AKA Schedule A) that includes any monetary value for any item purchased. All forms include the item identification (Manufacturer, Serial #, overall length, date purchased, etc.) but not what I paid for them.

Following that logic, the only thing the NFA could possibly report to the IRS is the $200 tax stamp since they cannot accurately indicate the actual purchase price or value of the items in the trust either at the time they are submitted or at the time they are approved (or any other time for that matter).

I've read the NFA docs several times and don't recall any mention of IRS reporting requirements but that's not to say it isn't there. Government docs tend to be boring as hell so I may have dosed off during that section.

[BigWaylon]

I have never submitted a Form 4 or "Assignment to Trust" doc (AKA Schedule A) that includes any monetary value for any item purchased. All forms include the item identification (Manufacturer, Serial #, overall length, date purchased, etc.) but not what I paid for them.

For that matter, I've never submitted a Schedule A with any NFA item listed. I've only sent one that lists "$200 cash"...30+ times so far.

So, all they have with the particulars of the item is the same F1/F4 an individual would submit.

[tb-av]

I would still question one of your lawyer's statements, "The NFA reports all Trusts to the IRS...".

I have never submitted a Form 4 or "Assignment to Trust" doc (AKA Schedule A) that includes any monetary value for any item purchased. All forms include the item identification (Manufacturer, Serial #, overall length, date purchased, etc.) but not what I paid for them.

Following that logic, the only thing the NFA could possibly report to the IRS is the $200 tax stamp since they cannot accurately indicate the actual purchase price or value of the items in the trust either at the time they are submitted or at the time they are approved (or any other time for that matter).

I've read the NFA docs several times and don't recall any mention of IRS reporting requirements but that's not to say it isn't there. Government docs tend to be boring as hell so I may have dosed off during that section.

The only reason I can figure why the IRS would be interested is if the Trust ever became so valuable that it was subject to some other sort of tax. I would expect that rare and could be circumvented by starting an additional Trust. Or... if the Trust needed to file taxes for some reason, perhaps the taxes paid would be a write off against income. In this scenario the Selling of the Trust for more than was paid for it would be income. So it may have to be shown that the money was paid back out to the Grantor and I would expect taxes have to be paid on it. ... adn it would not simply be the tax $1000 spent to receiving $1250 or $250... it would be $1250 of income the Grantor would owe tax on. Unless it could be Capital Gains....

Any way you look at it, it sounds like a nightmare and I can't imagine anyone wanting to buy into someone else's life expectancy even beyond trying to figure "where the money went" and "who's on first?"

[Conrad101st]

B/C a trust is designed to hold property for the life of a trustor for the benefit of a known beneficiary, your method would still create a problem. You can hold the property for a "class" of beneficiaries such as grandchildren. However, Ted the plumber who just paid you $500 was never the intended beneficiary when you set up the trust.

I think changing the class of beneficiaries would cause the trust to fail. And again, what happens when the trust maker (trustor) dies - generally the beneficiaries vest at that point.

Now, an LLC, you can outright sell that and all assets go with it. You are NOT selling assets so no form 4 would be needed. You would simply be selling control of the entity and what ever is in it just goes for the ride. That may be a better vehicle for your idea. You can set up an LLC for $100 in our state for example. Purchase one suppressor per LLC. Then if you get a Buyer, simply sell him the LLC. Transfer is immediate and you can recoup your costs via a little premium, which most would gladly pay to avoid a 10 month wait.

[wcjmt]

This thread has mixed together a lot of ideas and concepts that do not go together.
Every gun trust I have set up for clients and every good gun trust I have seen started out as a revocable trust. You want it that way so you retain the right to change it if needed. That also means it uses your social security number for identification. You cannot sell your social security number, you can sell the assets in the trust, but that is a new application and stamp.
The IRS has no interest in your trust. If you sell trust items you have a gain or loss based on the difference in the sale price and your tax basis, i.e. what you paid for the item. You report the gain or loss on your personal income tax form because the trust uses your SS number.
LLC's work on a different set of rules. My advice to a client wanting to sell the LLC ( or buy it) would be stash away a pile of cash because keeping you out of jail isn't going to be cheap. No way I would sign off on a client playing that game.
This isn't a place to take risks. My clients don't take risks.

[Conrad101st]

The asset goes with the LLC. Membership changes hands but the LLC does not sell, trade or transfer the asset.

This is simply a result of the fact that in 1934, they made laws without the foresight (understandably) to know that business entities would become ubiquitous and easily configured and sold by small businesses.

I know many people have made the same argument against the second amendment b/c how could anybody have anticipated an AR15 in every truck in 1789. Yet we as a pro gun group don't want new spin put on old laws do we?